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The Chancellor told MPs that a no-deal Brexit could mean flights between the UK and the EU are suspended the day after we leave the EU.

But Philip Hammond, who was being grilled by members of the Treasury Select Committee, said it was likely an agreement on air traffic services.

Mr Hammond told MPs: "Obviously one can plan for the most extreme scenario.

"It is theoretically conceivable that in a no deal scenario there will be no air traffic moving between the UK and the European Union on the 29th March 2019 but I don't think anybody seriously believes that that is where we will get to. "

The chancellor, who will deliver his budget in six weeks, has been criticised for saying that he wouldn't set aside money to prepare for a no-deal.

Mr Hammond said he would only spend the money "when it is responsible to do so".

But in the hearing this morning the chancellor rejected the interpretation of his views saying, instead, that he would spend when he needed to.

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He told MPs this morning: "There is a range of outcomes and what we will need to do at a point in time is determine what is a realistic worst case scenario that we need to plan for and invest for."

TheBritish Airline Passengers Association (BALPA) agrees that UK airlines could have to stop flying without a deal because there are no 'World Trade Organisation or any other rules to fall back on' for aviation.

Their general secretary Brian Strutton said yesterday in a statement: "UK airlines could find they have to stop flying – it’s that serious. And this would impact passengers long before March 2019 because airlines couldn’t sell advance tickets and, frankly, would passengers risk buying them?

"It is utter madness for anyone to think that a Brexit ‘no deal’ would be anything but a total disaster for our world leading UK aviation sector and beyond.

"After all, without air cargo we will not be able to export or import freely.

"The entire industry has said that we have to see evidence of the post-Brexit plan for aviation now if we are to avert a catastrophic crisis of confidence."

But in the hearing this morning Mr Hammond insisted it was unlikely that flights would be affected because it was in both the UK's and EU's interest to agree on that issue.

"On that specific point it's very clear that mutual self interest means that even if talks break down even if there is no deal there will be a very strong compulsion on both sides to reach agreement on an air traffic services arrangement."

The Chancellor has reportedly faced calls from Brexit -backing ministers to do more to show the UK is ready to quit stalling Brexit negotiations in order to push Brussels into talking about a future trade relationship.

European Council president Donald Tusk on Tuesday all but ruled out EU leaders giving the green light for trade talks at a crunch summit next week, as there has not been "sufficient progress" on withdrawal issues - a financial settlement, citizens rights and the Irish border.

Mr Hammond made clear the UK would be prepared for all outcomes, including leaving the EU with no deal, but stressed he would not commit money to that scenario now.

Philip Hammond has been dealt a blow ahead of the Budget next month (Image: PA)

The Chancellor said "we must be honest about the near-term challenges and complexities as we prepare to leave".

In an article for the Times, he went on: "As Chancellor of the Exchequer, it is my duty to be realistic about these challenges, and to carefully navigate the economy through this process in a way that protects our jobs, supports our businesses, underpins the prosperity of working families, and secures our public finances for decades to come.

"I also need to ensure that we are prepared for all outcomes, including a no-deal scenario.

"The Government and the Treasury are prepared. We are planning for every outcome and we will find any necessary funding and we will only spend it when it's responsible to do so."

Mr Hammond also stressed the importance of avoiding a no-deal Brexit, as a lack of clarity about future trading terms is leading to business uncertainty and slowed investment.

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"I believe the best stimulus we can provide for the economy right now, is certainty," he wrote.

"We will do that in two ways. First, by securing agreement on a time-limited implementation period - this is vital to give businesses and people the space to prepare for the future. Second, by reaching a deal on the terms of our future long-term relationship with the European Union."

The Chancellor's intervention may be interpreted as an attempt to fight back amid suggestions that pro-Brexit MPs want him ousted over his apparent support for a softer Brexit.

Mrs May has faced calls to reshuffle her Cabinet following her mishap-strewn Conservative Party conference speech, which sparked a botched plot to oust her from Downing Street.

Other Tory MPs are thought to favour the sacking of Foreign Secretary Boris Johnson over weeks of perceived disloyalty over Brexit.